JMP Technology Conference. March 4 th, 2014

Transcription

1 JMP Technology Conference March 4 th, 2014

2 Disclaimer DISCLAIMER: THE MATERIAL SET FORTH IN THIS PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS This presentation contains certain forward-looking statements. All statements other than statements of historical facts contained in this presentation, including statements regarding Rightside Group, Ltd. s ( Rightside or the Company ) future results of operations and financial position, business strategy, plans and objectives for future operations, are forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, shortterm and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under the heading Risk Factors in the Company s registration statement on Form 10 filed with the Securities and Exchange Commission (the SEC ), which is incorporated herein by reference. Moreover, the Company operates in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for Company management to predict all risks, nor can the Company assess the impact of all factors on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements the Company may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this presentation may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. You should not rely upon forward-looking statements as predictions of future events or results. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, the Company cannot guarantee that the future results, execution of its business strategy, including its proposed separation from Demand Media, Inc., as well as short-term and long-term business operations, plans and objectives, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of such forward-looking statements. Except as required by law, the Company undertakes no obligation to update any forward-looking statements for any reason after the date of this presentation, to conform these statements to actual results or to changes in the Company s expectations. The Company is a registrant under the rules and regulations promulgated by the SEC. Before evaluating whether you should consider an investment in the Company s securities, you should read the Company s registration statement on form 10 filed with the SEC, including all of the disclosures set forth therein, including under the headings Risk Factors and Management s Discussion and Analysis of Financial Condition and Results of Operations. The Company s SEC filings can be found at and ir.demandmedia.com. 2 March 4, 2014

3 Introduction to Rightside Our mission is to advance the way businesses and consumers define and present themselves online We are a leading provider of domain name services that enable you to find, establish and maintain your digital presence. Registry services through Rightside Registry Wholesale and retail registrar channels through enom and Name.com Premium domain name services through NameJet 3 March 4, 2014

4 Investment Highlights» We are an established industry leader» We serve a large global market that is benefiting from multiple growth drivers» We are positioned to capitalize on ICANN s new gtld Program» We have a highly visible and predictable financial model» We have significant growth opportunities» We have an experienced management team proven in the industry 4 March 4, 2014

5 Our Platform Our comprehensive domain name services platform touches the entire life cycle of a domain name. Registry Platform Registrar Distribution Aftermarket Related Products & Services 5 March 4, 2014

6 Largest End to End Domain Company #1 Wholesale registrar worldwide #2 Registrar worldwide 14 registry operator agreements for new gtlds with ICANN Interest in over 100 gtld applications Backend registry provider to Donuts ~15MM domain names under management Aftermarket services to help customers buy, sell and monetize high value domain names.ninja 6 March 4, 2014

7 Key Financial Highlights Revenue & Adjusted EBITDA ($MM) $250.0 $200.0 $150.0 $100.0 $50.0 $0.0 $139.4 $43.3 $96.1 $160.5 $47.8 $112.6 $173.0 $46.1 $126.9 $127.5 $ Mos. Ended 9/30/12 $139.6 $35.3 $94.0 $ Mos. Ended 9/30/13 $40.0 $30.0 $20.0 $10.0 $0.0 $24.9 $24.9 $31.4 $31.4 $25.4 $2.7 $22.8 $19.1 $1.6 $ Mos. Ended 9/30/12 $14.4 $5.6 $8.9 9 Mos. Ended 9/30/13 Domain Services Aftermarket & Other Adjusted EBITDA TLD Investment (1) (1) TLD investment per Demand Media Q and Q results. 7 March 4, 2014

8 Overview of TLDs 8 March 4, 2014

9 ICANN s New gtld Program A Top Level Domain, or TLD, are the characters to the right of the last dot in a domain address (eg.,.com is a TLD). In 2011, ICANN unveiled the New gtld Program, significantly expanding the universe of gtlds businesses and consumers are able to register as part of a domain name. The expanded namespace provides a number of benefits to both the domain name registrant and its target audience:» Descriptive suffixes, such as.engineer and.dance, create a more natural categorization scheme that allows websites to better connect with their target audience» As the inventory of high quality domain names dramatically increases, registrants will find it easier to register a domain name best suited to their needs» The introduction of Internationalized Domain Names will enable registrants to register domain names in other languages» The expanded namespace creates the opportunity for new business models that capitalize on the enhanced online identity and navigation capabilities presented by new gtlds Initial Program Stats $350MM Invested by applicants 1,400+ New gtld Applications 1,900+ Applicants 9 March 4, 2014

10 New gtld Categories Open TLDs Anyone can register a domain for any purpose (.web,.online) Specialized TLDs Intended for specific communities, professions, or interests (.actor,.mom) Gated TLDs Closed and typically reserved for brands (.gucci,.hsbc) Internationalized TLDs Numerous other languages coming soon 10 March 4, 2014

11 We are Building a Broad Portfolio of Exclusively Operated gtlds INITIAL 26 APPLICATIONS United TLD 107 w/donuts 133 Total ICANN REGISTRY OPERATOR AGREEMENTS IN OUR PORTFOLIO TO BE RESOLVED WE HAVE AN INTEREST IN 113 gtld APPLICATIONS or REGISTRY OPERATOR AGREEMENTS RESOLVED & NOT IN OUR PORTFOLIO (1) We have a strategic agreement with Donuts Inc. ( Donuts ), the largest new gtld applicant, through which we have acquired rights in over 100 registry operator agreements or applications. 11 March 4, 2014

12 Illustrative Unit Economics Direct Margins on our Exclusively Operated gtlds could be Game Changing 100% 80% 60% 40% ~90%+ 20% 0% ~10%.COM.NINJA 12 March 4, 2014

13 We have an Experienced Management Team Taryn Naidu Tracy Knox Wayne McLaurin Rick Danis David Ryan Steve Banfield CEO CFO CTO General Counsel GM, Registry GM, Registrar Currently serving as Executive Vice President, Domain Services, leading Demand Media s registrar business, which includes enom and Name.com. Since early 2011, Mr. Naidu has also led the registry team, establishing our strategy for acquiring gtld registry operator rights in ICANN s new gtld program, as well as the technology platform and business operations to support our registry business. Prior to joining Demand Media, Mr. Naidu worked at Momentous Corporation, a Canadian domain name marketing services group, where he held various roles, including CEO and President of Pool.com, a leading domain name auction company. Nearly 20 years of extensive experience in global finance across diverse industries including software development and ecommerce. Most recently, Ms. Knox was CFO of A Place for Mom, Inc., a private equity backed venture, directing all finance, accounting, human resources and training activities. She also previously served as CFO of Drugstore.com, leading the financial operations, business development and investor relations divisions of the company. Currently serving as Senior Vice President, Technology for Demand Media s registry group where he is responsible for managing both the technology roadmap as well as day-to-day operations of the registry systems. Prior to joining Demand Media, Mr. MacLaurin served as CTO at Sedari, a consulting firm focused on ICANN s new gtld Program, and as the Executive Director of the Domain Name System Operations, Analysis and Research Center, a non-profit organization seeking to improve the Internet s domain name system infrastructure. Currently serving as Demand Media s Senior Vice President, Assistant General Counsel and managing all legal issues related to its domain name services business since joining in Prior to joining Demand Media, Mr. Danis held senior positions in the legal departments of Nokia Corporation, a global leader in mobile communications, Yahoo! Inc., a leading Internet portal and online media company and broadcast.com, an Internet streaming media company. Joined Demand Media in 2013, serving as VP, Domain Name Services and GM, United TLD over that period Has extensive experience at start-ups and multinationals, and most recently led global customer support efforts at Electronic Arts, a Fortune 500 company Joined Demand Media in 2013 as SVP and GM, Registrar Services 20+ years of experience in the tech and start-up space, including VP & GM at Real Networks and SVP & GM at Sony Pictures Digital Networks and Sony Connect 13 March 4, 2014

14 14 APPENDIX

15 Phases of a gtld Release 15 March 4, 2014

16 Non-GAAP Financial Measures To provide investors, analysts and others with additional information regarding the Company s financial results, this presentation includes adjusted earnings before interest, income taxes, depreciation and amortization, or Adjusted EBITDA, a non-gaap financial measure. A reconciliation of this non-gaap financial measure to the most directly comparable GAAP financial measure has been included in the Appendix to this presentation. The Company s non-gaap Adjusted EBITDA financial measure differs from GAAP net income (loss) in that it excludes certain expenses such as taxes, gain on other assets, net, depreciation, amortization, stock-based compensation, and the financial impact of acquisition costs. The Company uses this non-gaap financial measure to understand and evaluate it financial performance and operating trends, including period to period comparisons, to prepare and approve its annual budget and to develop short and long term operational plans. The exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period to period comparisons of the Company s underlying recurring revenue and operating costs which is focused more closely on the current costs necessary to utilize previously acquired long-lived assets. In addition, management believes that it can be useful to exclude certain non-cash charges because the amount of such expenses is the result of long-term investment decisions in previous periods rather than day-to-day operating decisions. Accordingly, the Company believes that this non-gaap financial measure provides useful information to investors and others in understanding and evaluating the Company s operating results in the same manner as the Company s management and in comparing financial results across accounting periods and to those of peer companies. The use of this non-gaap financial measure has certain limitations because it does not reflect all items of income and expense that affect the Company s operations. The Company compensates for these limitations by reconciling the non- GAAP financial measure to the most comparable GAAP financial measure as set forth in the Appendix to this presentation. This non-gaap financial measure should be considered in addition to, not as a substitute for, measures prepared in accordance with GAAP. Further, this non-gaap measure may differ from the non-gaap information used by other companies, including peer companies, and therefore financial comparability may be limited. The Company encourages investors and others to review the Company s financial information in its entirety and not rely on a single financial measure. 16 March 4, 2014

17 GAAP to Non-GAAP Reconciliation Nine Months Ended September 30, Year Ended December 31, Net Income (loss) $(4,973) $(359) $(989) $3,818 $2,717 Add (deduct): Income tax expense (benefit) (1,930) (93) (162) 2,557 2,004 Gain on other asset, net (1) (2,566) Depreciation and amortization (2) 11,054 10,304 13,494 15,250 17,417 Stock-based compensation (3) 7,271 7,685 10,112 9,738 2,739 Acquisition costs (4) Adjusted EBITDA $8,887 $17,537 $22,750 $31,363 $24,877 (1) Net gains on sales and withdrawals of interest in gtld applications included in gain on other assets, net. (2) Represents depreciation expense of our long-lived tangible assets and amortization expense of our finite-lived intangible assets. (3) Represents the fair value of stock-based awards and certain warrants to purchase our stock included in our GAAP results of operations. (4) Acquisition costs include legal, accounting and other professional fees directly attributable to acquisition activity. 17 March 4, 2014

18 Thank you